Experts predict prolonged tight monetary policy

12 January 2015, Abuja – Analysts at BGL Securities Limited have estimated that the Central Bank of Nigeria (CBN) will maintain its restrictive monetary policy stance in 2015.

The investment firm stated this in its recent economic outlook for 2015.

Central Bank of Nigeria, CBN.

Central Bank of Nigeria, CBN.

According to BGL, this would however be largely influenced by the performance of crude oil price and its consequences on the government primary balances, foreign exchange rate volatility and the foreign reserves.
However, the analysts predicted that interest rate will remain high for most part of 2015 with a potential for increase in MPR if macroeconomic stability is threatened.
Nigeria’s Gross Domestic Product (GDP) grew by 6.23 per cent in the third quarter of 2014, up from 5.17 per cent in the corresponding period of 2013 but lower than the 6.54 per cent recorded in the preceding quarter.

The non-oil sector recorded 7.51 per cent growth in real terms, lower, compared to 8.46 per cent at the corresponding period in 2013, yet higher than 6.71 per cent in the second quarter of 2014.

However, oil sector continued to drag growth recording an average decline of -5.06 per cent in the first three months of the year. This was due largely to the decline in oil production which declined to 2.15million barrel per day in the third quarter of 2014 from 2.26million barrels per day in the first quarter of 2014. The budget oil production benchmark for 2014 was 2.3882m barrels per day.

Nonetheless, the report pointed out that despite challenges, the Nigerian economy remains strong, even as the country remains an emerging global power house.

“Impressive feats on moderation of inflation rate, improvement in per capita income, and sustained strong growth are note worthy in this regard,” it added.
Commenting on the outlook for the political environment, the report argued that stronger opposition provides respite for optimism rather than chaotic outcomes at general elections in 2015, adding that there is increasing citizen awareness.

The report noted that the effects of United States quantitative easing tapering, flight to safety, capital reversal as some of the factors that hindered the growth of the stock market in 2014.

The firm however pointed out that “fundamentals shows that Nigeria’s equities market may be significantly under-priced.

In its review of the performance of the stock market in 2014, it stated that “Price to earnings ratios of most sectors on the NSE are lower than that of its peers. The banking sector, agriculture and oil and gas are very attractive.

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